By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Expenses incurred to provide services shall form 24 25 72 Bombay Chartered Acountant Journal, november 2013 BCAJ INDIRECT TAXES 208 (2013) 45-B BCAJ part of assessable value if such expenses are inseparable and are integrally connected with the performance of taxable services. Mere filing of Balance Sheets and returns does not amount to disclosure of facts yet, if the issue was debatable, penalty should not be levied.
Facts:
The respondents engaged in providing clearing and forwarding services, claimed certain reimbursement of expenses which were rejected by the revenue. The respondents contended that even if the case is adjudicated in favour of department, the respondents be allowed CENVAT credit of service tax paid on procurement of such services and since the respondents had filed Balance Sheets and returns, there was no suppression of facts by the respondents. Further, since the law was in a debatable stage levy of penalty was not justified.
Relying on Larger Bench’s decision in case of Sri Bhagavathy Traders 2011 (24) STR 209 (Tri.-LB), the revenue contested that the expenses, which are essentially required and are integrally connected to the services, cannot be excluded while determining value of taxable services.
Held:
The Hon. Tribunal, partly allowing the appeal, held that expenses incurred to provide services shall form part of assessable value if such expenses were inseparable and integrally connected with the performance of taxable services and thus tax was required to be paid on the same. However, CENVAT credit would be allowed subject to verification of records and evidences presented by the assessee. Mere filing of Balance Sheets and Returns would not amount to disclosure of facts. However, since the issue was litigative as the same travelled till Larger Bench to attain finality, penalty would not be levied.
